Introduction
Netflix was founded by Reed Hastings and Mark Randolph, who noticed a free niche in the video rental market associated with the inconvenience of using existing salons and services. Using an innovative approach in this business, they created the world’s first DVD rental. At the moment, the Netflix Internet service is a paid multimedia resource offering users access to TV series, movies, and shows. The global spread of the Internet has allowed Netflix to move beyond the US market to the global market.
Thus, the company’s service became available anywhere in the world with an Internet connection. Instead of further promoting their DVD distribution program, they saw that there was a rapid development of Internet technologies and that they were the future not only of this market but also of many others. They quickly adapted to the changes by applying technological and marketing innovations. This report will examine the basic principles and theories developed by Netflix to remain successful in the entertainment market.
Current Stage of Leadership
At the moment, the leader of the company is Reed Hastings. The entrepreneur and developer have been at the head of Netflix from the beginning. Therefore, all the company’s significant changes and corporate culture are connected with his activities. Netflix strives to eliminate excessive specialization and avoid the chaos of growth while maintaining employees’ freedom, taking into account their ambitions and supporting their aspirations for autonomy (Hastings & Meyer, 2020).
There is a culture of innovation, independence, and responsibility that can detect issues and find solutions without guidance from above in place of explicit directives and formal regulations. A flexible system of stimulating labor activity is being introduced, the labor organization is being enhanced, conditions are being provided for improving the quality of working life, social programs are being developed, and all of this is done with this objective in mind (Hastings & Meyer, 2020). Netflix pays great attention to the strategy for boosting motivation for satisfying work. In actuality, this strategy results in middle-level employees becoming more independent in making decisions about how to organize their work.
The management of the company is confident that systemic issues within the organization demand not only structural and functional solutions but also changes to the policies and practices of employees who employ systematic thinking. These changes will make an appearance in the team members’ versatility of actions and consciousness. Therefore, the issue of keeping and encouraging talented employees would be the most challenging for this company. The foundation of a well-established personnel management system is the prioritization of sociopsychological and financial motivational strategies (Hastings & Meyer, 2020).
The official process for evaluating performance has altered as a result of the impression that all employees are on an equal basis and work only for the interest of the organization’s members. Traditional bureaucratic evaluation processes are ineffective in boosting motivation and productivity.
An open discussion with staff on the standard and outcome of their work is a crucial component of a human resources manager’s functionality. Standardized forms of training, for example, advanced training courses, the appointment of a mentor, and long-term career development cards are classified as ineffective and are not used in the company. Through experience, observation, reflection, introspection, reading, and discussion, highly productive people develop themselves (Hastings & Meyer, 2020).
Without a doubt, Netflix has made significant progress by emphasizing respect and trust between all parties involved in the labor process (Hastings & Meyer, 2020). Through the use of efficient personnel management tools, the cooperation of all leaders, and line managers who are committed to keeping talented employees in their departments and upholding a stable social order, businesses themselves produce talented individuals.
Drivers of Change
The transformation of Netflix was due to the fact that there was a rapid change in technologies to which it was necessary to adapt. Initially, the company was engaged in delivering a DVD, on which the basis of the model was built. However, Netflix executives made an important decision that allowed the organization to maintain its innovative culture. This aspect is still used in the company since Netflix significantly often experiments with the formats of series and films, their form of release, and viewing (Hastings & Meyer, 2020). To avoid bankruptcy as a former competitor of Blockbuster, it was necessary to reorient to the new rules of the game quickly (Meng et al., 2022).
Initially, they wanted to release a set-top box: the device could download a movie overnight so the user could watch it the next day. The development has already been registered, and the right to demonstrate the movie was received, but the idea was rejected.
YouTube and other streaming platforms were gaining popularity — it became clear that the future was behind them. Therefore, all forces went to work on the concept of data streaming, which was fully ready in 2007. Its feature is the personalized Cinematch recommendation system — it not only accurately “guessed” the preferences of a particular person but also brought trendy but underrated films to the top (Meng et al., 2022). However, the idea worked: the people attracted by Cinematch did not want to give up the novelty, becoming its regular users. Consequently, the main factors driving the changes in the company were the desire to meet customers’ expectations and how quickly the development of new technologies and innovative solutions took place.
The guiding principle of the company’s innovation culture was big data technologies, which determined the direction in which the offers and technologies for the streaming giant were developing. Big data analytics are used by Netflix to enhance the reliability and quality of its video feeds (Maddodi & Prasad, 2019). The technological innovation they use – an intelligent neural network that helps video hosting decide which programs will be attractive to users, is also based on big data technology (Maddodi & Prasad, 2019). The recommendation system affects 80% of the content subscribers watch on Netflix (Meng et al., 2022). Thus, the company effectively used innovations such as big data, analytics, and an intelligent neural network to position itself as a clear leader in the field of video services.
Change Management Theories
Netflix is among the best examples of organizational change. It accepts the changes in order to adapt to the new environment. The organizational change at Netflix serves as an example of how Lewin’s change management paradigm is used in real life. Before being completed, every organizational change passes through a few stages. Technology, culture, and environment are the essential variables that encourage an organization to accept change (Joseph Galli, 2018).
In order to respond to the current environment, Netflix’s organizational change has replaced outdated practices with innovative solutions. According to Lewin’s three-step methodology, understanding the idea of stability is essential for comprehending how change works. He referred to the forces that push for change as motivational forces, and the ones that work to maintain stability as limiting forces (Joseph Galli, 2018). These forces being equal maintain a stable position within the organization. Implementing changes indicates a violation of their harmony due to a mixture of interactions, an increase in the importance of motivating factors, or a decrease in the importance of limiting factors.
This approach is observed in Netflix, which has taken steps to implement consistent changes that have allowed the organization to remain competitive so far. Searching for incentives and incentives for organizational changes is the first stage of “Unfreezing” (Kobiruzzaman, 2022). In the case of Netflix, it was a desire to switch to a training form of providing content since maintaining a business model built on a DVD average did not seem more urgent. Kurt Lewin recognized that change is a process, which he later named the transition process, rather than a transitory event (Kobiruzzaman, 2022).
In the second stage, Netflix developed various solutions and tested them to determine the most appropriate model for providing its services. In addition, it should be noted the gradual transformation of the organizational culture, which sought to become more and more innovative by creating comfortable conditions for employees. At the last stage, the changes are accepted and are the norm. At the moment, Netflix has brought out an innovative formula for its activities, and now they are working on more specific issues to remain competitive.
Results of the Change in Meeting the Needs of the Stakeholders
The company has been able to develop a new successful business model for the film industry where supply will immediately focus on the demand presented by customers due to the combination of large-scale film production and innovative marketing strategies based on the analysis of vast amounts of data on customer preferences. The business may immediately plan the creation of various entertainment content, including movies, for upcoming times by evaluating data about its clients. It can also quickly create its own content and distribute it to subscribers via the Internet (Meng et al., 2022).
This business model also allows Netflix to take advantage of the economic benefits of vertical integration since all stages of the chain – from the decision on the production of services to the end user – are controlled by one owner. From this perspective, the Netflix model represents a typical stage in the growth of the film business, one that is marked by a high level of risk and unpredictability (Fagerjord & Kueng, 2019). Vertical integration reduces this risk, and this shows the interest of investors who need to understand that the company has a stable and transparent organizational activity.
It should also be noted that the high degree of integration of various stages of the film business and the growing scale of Netflix and other streaming services pose a specific threat to inclusivity, diversity, and universal freedom of expression in the global film industry. This aspect can significantly influence other stakeholders, namely directors, actors, and other professionals in the field. When discussing cinema as an industry, it is also necessary to consider that contradictions between commercial and artistic motivations broadly characterize this field of activity. This can subsequently significantly affect the quality of the material and cultural heritage (Fagerjord & Kueng, 2019).
However, it is precisely this uncertainty, the unpredictability of the financial results of the film industry in practice, that encourages film companies to constantly look for ways to reduce the risks of film production, at least to a certain extent, to guarantee the box office of the film.
From this point of view, the new opportunities for predicting consumer behavior that Netflix uses, and big data analysis technologies cause some concern. New technologies make the film industry more predictable and controlled, potentially leading to the predominance of commercial motivations over creative ones to the simplification of the creative process, which is inextricably linked with unpredictability risk (Fagerjord & Kueng, 2019). However, the activity of Netflix is associated with the satisfaction of employees, investors, and customers, as the changes occur in stages and thoughtfully.
Conclusion
Innovation and organizational changes are the main ones for ensuring the organization’s sustainability, stability, and efficiency and forming the essential factors of profitability and growth. The addition of an intelligent neural network to the Netflix platform is a significant advance connected to the successes in this field. The platform analyzes audience feedback to determine audience ratings for films and entertainment shows as well as consumer preferences and demand. It then gives the most acceptable result for a particular user. From the history of the company and its activities, it can be concluded that Netflix adheres to the strategy of innovative organizational change.
The company’s innovative potential is achieved through the combined consideration of the enterprise’s production and technological, scientific, technical, financial, economic, and human potential. Consideration and analysis of the Netflix enterprise reveal that the creation of an innovative strategy and the application of innovative development now play a significant part in the growth and maintenance of the organization’s competitive condition. The study thus demonstrates that the company’s offensive innovation strategy, which it has followed since its founding and which entails the active introduction of innovations into its activities to maintain a leading position in the market, is a promising option.
Reference
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Hastings, R., & Meyer, E. (2020). No Rules Rules: Netflix and the Culture of Reinvention (Illustrated). Penguin Press.
Joseph Galli, B. (2018). Change management models: A Comparative analysis and concerns. IEEE Engineering Management Review, 46(3), 124–132. Web.
Kobiruzzaman, M. M. (2022). Lewin’s Change Management Model. Newsmoor. Web.
Maddodi, S., & Prasad, K. K. (2019). Netflix bigdata analytics – the emergence of data driven recommendation. SSRN Electronic Journal, 3(2), 41–51. Web.
Meng, H., Zhang, J., Zhang, Y., & Zhou, W. (2022). An assessment about the business and profitability analysis for Netflix. Proceedings of the 2022 2nd International Conference on Enterprise Management and Economic Development (ICEMED 2022). Web.